What is BEE?
BEE, or more accurately B-BBEE refers to Broad Based Black Economic Empowerment is a policy of the SA
government which encourages companies to help transform the country. BEE is about broad-based activities
that benefit black people.
Definition: Black means African black, coloured or Indian people who ARE South African citizens by birth or became a South African citizen before 27th April 1994.
NB the definition of coloured now also includes Chinese
BEE compliance is measured by means of a scorecard (a broad based scorecard). The scorecard is based on various elements and your company is measured out of a maximum of 100 points (in some cases it is possible to obtain more than 100 points).
The BEE Codes of Good Practice is a government document that describes how the scorecard works.
The elements on which you are rated is what make BEE broad-based. It covers various aspects of the economy, society and the company.
The five elements
- Ownership – this measures the percentage of shares in the business that are owned by black people (as per the definition above)
- Management Control – the directors, top management and the employees in the business
- Skills development – this measures the amount of money spent of training of black employees
- Enterprise and Supplier development – Procurement (your suppliers and their scores) and Development – your spend on helping other black owned enterprises grow, both suppliers to you and non suppliers.
- Socio-Economic Development – your spend on assisting charitable organisations
Once you have calculated a score it gets converted to a LEVEL – so we talk about level 8 or level 7 up to level 1 companies.
Points to Levels Conversion
|Above 100 points||Level 1|
|95-100 Points||Level 2|
|90-95 Points||Level 3|
|80-90 Points||Level 4|
|75-80 Points||Level 5|
|70-75 Points||Level 6|
|55-70 Points||Level 7|
|40-55 Points||Level 8|
|Less than 30 Points||Non-compliant|
Types of Companies
The codes define three types of companies;
- EME below R10 million
- EME – exempt micro enterprise – a company that has an annual turnover of less than R10 million. These companies are automatically given a BEE score of 65 points (level 4), and if majority black owned, level 2 and if 100% black owned, level 1
QSE between R10 million and R50 million
QSE – Qualifying Small Enterprise – an enterprise with an annual turnover of between R10 million and R50 million. The QSE will need to fill in a scorecard, and must choose all 5 elements not 4 of the 7 elements.
Generic above R50 million
Generic – all companies with a turnover above R50 million per annum. They need to comply with the seven elements of broad based black economic empowerment.
An EME does not need a scorecard. They are automatically allocated a good BEE score. They are allocated a level 4, or level 3 if they are black owned.
A QSE does need a scorecard, but they must choose only four of the seven elements, this gives a QSE a simpler/easier scorecard to comply with.
In brief, the QSE scorecard has the following components and points available:
|Human Resources||Employment Equity||25|
|Indirect Empowerment||Preferential Procurement||25|
|Residual||Corporate Social Investment||25|
Broad-Based Black Economic empowerment emphasises all aspects of business and society. Each element is worth 25 points on the scorecard. As a QSE (Qualifying Small Enterprise) you can select any four of the seven elements.
The Generic Scorecard is the scorecard that all other companies should follow. It makes use of all seven elements.
In brief, the generic scorecard has the following components and points available:
|Human Resources||Employment Equity||15|
|Indirect Empowerment||Preferential Procurement||20|
|Residual||Corporate Social Investment||5|
Broad-Based Black Economic empowerment emphasises all aspects of business and society. Each element is worth between 5 and 20 points on the scorecard. In order to maximise your points, you will need to try to comply with all seven elements.
Becoming BEE compliant or getting a certificate or getting registered implies calculating and producing a scorecard (a broad based BEE scorecard). It is no use saying “We are BEE” – that does not count – even if your business has taken some of the actions and begun meeting some of the targets. “Becoming BEE” is only about the points/level you have earned and producing a scorecard to certify this.
The process is to identify which scorecard you need to follow, identify the steps you have taken to meet targets, calculate your score, and collect the documentation and evidence to prove that score. Thereafter it is a good idea, though not mandatory, to get that scorecard independently verified, by your auditor, or even a verification agency.
- There are currently no accredited verification agencies.
- It is not mandatory to use a verification agency, though it does ad credibility to your scorecard.
- The verification agency is not allowed to consult to you. Their only job is to verify the accuracy of the information presented to them.
- If you do not have accurate evidence you will earn no points!
The best way to become compliant is to regard BEE as a process and not a one-time event. That way you will always be up to date with your information and never have that “last minute rush” to obtain your scorecard.
The EconoServ 10 Step Process to BEE compliance
- Learn about BEE
- Look at where BEE is likely to affect you
- Look at the indicators to find ways of scoring points
- Collect documents around the indicators where points can be scored
- Do an initial calculation to find out how many points you have achieved
- Design your BEE report, Scorecard, Profiles, policies and Strategies around BEE and display your scorecard level
- Spend time and effort and earn the points
- Do a final self-rating – must be signed once you are completely happy with it
- Look for ways to find more points on the scorecard
- Not mandatory – get an independent organisation to sign off your scorecard (Auditors or Rating Agencies)
We can help you with all aspects of the 10 step process. Although we are not a verification agency, we will happily recommend one once you are ready and want a verification.
To earn BEE points on Preferential Procurement a company needs to ask it’s suppliers for their BEE scorecard.
In short one company will ask another company for their scorecard
until all companies have a BEE scorecard of their own.
The only direct reason you will need a scorecard is that your customers are asking for one. If you don’t respond you will not be penalised legally but rather potentially not get the business you desire.
A Scorecard = business
Non Compliance = less business/no business.
How Long does it take?
B-BBEE is a 10 year process. Any companies wanting to produce a scorecard must realise that the targets are not meant to be reached today, it is a process that should take 10 years. The idea is to get a score and over a period of time improve it.
Remember – BEE and becoming BEE compliant is a long term goal, you can’t become BEE compliant instantly. You need to prepare and work on the scorecard. When you are ready, becoming BEE compliant will become part of the daily running of your business.
The BEE Calculations
The calculations are simple – in each instance, you have an indicator. The indicator will have a target and a points available – you need to try and reach the target to earn the points.
EG Socioeconomic Development
Goal – spend 1% NPAT of SED to black people
Target 1% NPAT
If you spend 0.5% you will earn 0.5/1% NPAT * 5 points = 2.5
What we can do to help you
EconoBEE is a specialist BEE compliance company. We assist companies with BEE compliance.
Our services include advisory consulting, training, self-assessments and documentation logging
EME Pack – a very quick and easy solution for EME’s. We will prepare an Exemption Statement, BBBEE Policy and a statement to customers. In addition, we will supply you with various reference documents to help you understand more about BEE.
We have multiple solutions to producing a BEE scorecard. Our very simple and cost effective solution is EconoBEE Scorecard.
EconoBEE Scorecard is a very straight forward, simple and easy to use self-assessment rating tool. It will produce a BEE scorecard in minutes and help you understand an improve on your scorecard.
EconoLog/10 Steps to BEE – advanced service. We will actively help you prepare your BEE scorecard. We assist with documentation, advice, training etc to make sure you have all the required tools at your disposal to make BEE compliance wok for your business.
We are very well positioned to help you secure your BEE scorecard rating. We can assist you with all the requirements and even help you find a Verification Agency.
As an experienced BEE compliance company, we are able to assist you with any BEE related query. We have built up many associations with companies to assist us in giving the most comprehensive BEE service possible. Contact us to find out more!